This supports the theory that whatever spare capacity is left in the world is the wrong kind of oil. According to the IEA, sour crudes have been at an abnormally wide discount to sweet grades since February. Maybe the Saudis have been reluctant to increase production because they know there is no market for the sour heavy grades they can provide.
From the most recent IEA oil market report:
Recent US data shows there was a sharp increase in
Saudi Arabian crude imports in the US towards the end
of March, which helps to partly explain the persistence
of a very weak sweet-sour spread despite the restarting
of coking capacity on the US Gulf Coast. West Texas
Sour continues to trade at a discount of more than $3 to
WTI, more than $1-$2 lower than normal levels.
Further sour pressure is coming from the increased
supply of Russian Urals and Iraqi crude, placing
competitive pressure on sour crudes heading to the US
Gulf Coast.
Reuters
Conoco refuses Saudi offer of extra oil -trader
Tuesday May 25, 5:02 pm ET
NEW YORK, May 25 (Reuters) - U.S. oil refiner ConocoPhillips (NYSE:COP - News) turned down an offer to take extra oil from top OPEC exporter Saudi Arabia because the oil was too heavy a grade, a trader at the company said on Tuesday.
"We are full of heavy grades, we really didn't have the appetite for any more," said the trader.
The trader said even with Saturday's outage of the U.S. Gulf Mars platform for up to three weeks, Conoco's supplies were adequate.
"There will be some minor cutbacks in deliveries, but not significant enough to impact refining operations," said the trader about the Mars outage.
U.S. refiners said they were contacted last week by Saudi Aramco President Abdullah Jumah to take extra barrels loading in June outside of term contracts.
On Monday, Valero Energy Corp. (NYSE:VLO - News) said it will receive 1.5 million to 3.0 million extra barrels of crude outside of term contracts loading in June from Saudi Arabia.
The barrels, coming in three to six cargoes, will be a mix of heavy grades and medium grades and load sometime June, said Valero spokeswoman Mary Rose Brown. |
